• The “Sell America” trade is resurfacing, with the dollar and Treasuries under pressure.
  • Fed policy uncertainty and potential yen carry-trade unwind are driving volatility.
  • US equities remain resilient, but hot data could revive Fed concerns.

Renewed Pressure on Dollar and Bonds

Barclays warns that the “Sell America” trade is making a comeback, particularly in the dollar and US bond markets. Investors are grappling with uncertainty over the Federal Reserve’s next moves, while concerns about a yen carry-trade unwind and AI spending add to the mix. The dollar and long-duration Treasuries are feeling the brunt, as policy risk and global funding costs rise.

“The market is pricing in a more cautious Fed, and with the yen’s recent strength, we’re seeing a classic unwind of carry trades,” said a strategist at a major bank, speaking on condition of anonymity. “This is putting pressure on USD and duration.”

The yen’s intervention risks are also emerging, as Japanese authorities signal they may step in to stabilize the currency. This adds to the cross-border policy uncertainty that’s keeping investors on edge.

Equities Resilient, But Risks Loom

Despite the turbulence in FX and fixed income, US equities continue to hit new highs, supported by strong corporate earnings. Barclays remains constructive on stocks, but warns that a hot jobs report or inflation print could quickly revive Fed concerns and intensify market volatility.

“Equities are being buoyed by earnings, but the macro backdrop is fragile,” noted the strategist. “If we see a surprise in the data, the selloff could spread.”

Looking Ahead

The near-term path depends on Fed communication, US fiscal trajectory, and how policymakers coordinate on currency stabilization. Higher volatility is likely, with asset pricing uneven across currencies, bonds, and equities. Investors are closely watching inflation and employment data, as well as central bank signals, for direction.

We reached out to Barclays for additional comments but did not receive a response by press time. This article will be updated if more details emerge.